When PATTERNS fail, they almost always come back to touch it and then CONTINUE (UPDATE)

UPDATE: is “I’m not sure, but suspect” good enough?  We went thru the level and closed below it BUT the next day moved strongly higher.  A weekly close above the old pattern is good but my perspective is these old patterns work – pretty exactly.

plus, it looks like we aren’t complete from a wave count.

going to play it safe and look for further downside.

guess we’ll see ….

 

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we now have a GREAT opportunity to see if the 10000 level holds on the German Dax.  I blogged about it here: http://bartscharts.com/2014/12/14/german-dax-voo-doo-is-a-wonder-to-behold/ and at the time it was finishing a MONUMENTAL pattern from the all time low 30+years ago.  Guess you could say it “worked” because it held the market at that level for over a year and then it exploded higher earlier this year.

now, one of the “axioms” of PATTERN recognition is when a PATTERN fails (which it ultimately did a year later) the market will, invariably come back to touch it and then continue in the direction of the break.

yes, I know, sounds CRAZY but as a PATTERN dude, you HAVE to TRADE WHAT YOU SEE not WHAT YOU BELIEVE .. what do we have?

A PERFECT pattern on top of a former long term pattern …this is what we SEE:

• .618/.786 overlap retracements
• 1.618 extension
• projection into the area
• measured moves w/ the projection (note the blue arrows)
• ALL ON TOP OF A FORMER PATTERN

so, time for the IF then …

• IF this pattern holds then the German Dax should move higher …. perhaps even taking out the old high.  I know that belief is crazy .. but it’s what I see.
• IF THIS PATTERN FAILS – it ranks up there as a “big deal” and is VERY VERY significant? Why?
  • In a very strong UP trend PATTERN dudes ALWAYS trade the first pattern int he direction of the trend.
    • In a directional change – that first pattern will usually fail and then, well, it’s not good so to speak and the correction will go much deeper than “they” expect.

So, knowing that, yes, the global market is connected believe this is a VERY good proxy to see if the support holds … if it does, then believe we’ll carve out a support zone in the US markets and others ….

Stay tuned and let me know if you have any questions.

B